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4. Suppose now you have an infinite-horizon model, = 0.9 and = 0.5. Once a person accepts a job at a wage, they remain
4. Suppose now you have an infinite-horizon model, = 0.9 and = 0.5. Once a person accepts a job at a wage, they remain in that job at that wage forever. In each period, there is a 10% chance of losing a job. Suppose that there are three possible wage offers: 4, 6, and 8. 1 (a) Which of the three wage offers are accepted and which are rejected (if any)? (b) What is the unemployment rate?
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